Put Option
A put option is a financial contract between two parties, the buyer and the seller, that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price (the strike price) within a specified period of time. The seller of the put option is obligated to buy the underlying asset from the buyer at the strike price if the buyer exercises their option. Put options are most commonly used in the stock market to protect against the decline of the price of a stock below a certain level.
History of Put Options
Put options have been around since the early days of the stock market. The first recorded use of a put option was in the early 1700s in London, when a trader used a put option to protect himself from a decline in the price of a stock. Since then, put options have become an important tool for investors to hedge against the risk of a decline in the price of a stock. Put options are also used by speculators to make a profit from a decline in the price of a stock.
Comparison Table
| Put Option | Call Option |
|---|---|
| Gives the buyer the right to sell the underlying asset | Gives the buyer the right to buy the underlying asset |
| Obligates the seller to buy the underlying asset | Obligates the seller to sell the underlying asset |
| Profits from a decline in the price of the underlying asset | Profits from an increase in the price of the underlying asset |
Summary
Put options are a financial contract between two parties that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified period of time. Put options are most commonly used in the stock market to protect against the decline of the price of a stock below a certain level. For more information about put options, you can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Call Option
- Option Contract
- Option Premium
- Option Strike Price
- Option Expiration Date
- Option Exercise Price
- Option Moneyness
- Option Delta
- Option Gamma
- Option Theta
